Other Issues Critical to Chinese Decisionmaking

Decisionmaking about nuclear power is, to a great extent, about harnessing technology and industrial resources. But several other issues with strategic implications will also be critical concerning China’s future participation in international trade and global nuclear governance.

Decisionmaking about nuclear power is, to a great extent, about harnessing the technology and industrial resources discussed in the first three chapters of this report. But several other issues with strategic implications will also be critical, not only to the technological direction of China’s nuclear program but also concerning China’s future participation in international trade and global nuclear governance.

Energy Security

From the outset, China’s technocrats and political leaders who embarked on nuclear power development took for granted that the state was obligated to provide for a sufficient and reliable energy supply. Reflecting conventional wisdom in foreign nuclear programs, beginning in the 1980s, Chinese decisionmakers were warned that China would run out of uranium unless they took steps to close the nuclear fuel cycle. In 2007, three years after premier Wen Jiabao dramatically increased the pace of reactor building, scientists at CIAE proposed that China undertake a radical transition from PWRs to fast breeder reactors, proposing that fast reactors account for 80 percent of China’s nuclear capacity by 2050. Should China continue to operate only PWRs, a leading CIAE scientist said that, in sixty years, China would need a supply of uranium equivalent to about half of the world’s uranium resources.265

China has good reasons to be concerned about energy security. During the last three decades of uninterrupted high economic growth, China’s welfare has come to depend on a reliable and increasing supply of energy. In line with the rise of annual per capita GDP in China from about $100 in 1980 to about $7,000 in 2017, China’s annual per capita consumption of energy during the same period has increased from 600 kilograms to 2,000 kilograms of oil equivalent. The trend line in the electricity sector is similar. In 1990, China consumed just one-fifth of the amount of electric power consumed in the United States; by 2013, China led the world in electricity consumption, exceeding the second-place United States by 25 percent.266

China’s leaders, energy experts, and media in recent years have raised the profile of energy security as a national policy concern. They have focused most of their attention upon China’s supply of petroleum, which accounts for 20 percent of China’s total primary energy consumption. After decades of self-sufficiency, China is now a net importer of ever-larger quantities of oil and currently relies upon foreign sources to meet 60 percent of its requirements. Some experts forecast that China’s dependency may increase to about 75 percent by 2030. Similar concerns have been raised about China’s rising imports of natural gas.267

Rising dependence upon foreign sources of oil and gas has raised awareness about energy security, but these fuels generate little electricity in China. Far more significant to the power sector is China’s conventional expectation that more and more uranium will be required to decarbonize China’s power system before the end of this century and, beyond that, serve as a major electricity fuel well into the twenty-second century. As is also the case for fossil fuels, the domestic supply of uranium is limited, and China expects to rely on external sources to meet most of its future uranium needs in the near to medium term.

From the outset of China’s nuclear power program and until the mid-2000s, when it began ramping up nuclear power plant construction, China’s demand for uranium closely tracked its domestic uranium production. Thereafter, China’s uranium deficit—the amount China annually required over and above what it mined and milled domestically—steadily increased to reach about 2,600 metric tons of uranium (MTU) in 2016.268 China’s demand for uranium will continue to increase steadily. China may require 10,100–12,000 MTU in 2020, 12,300–16,200 MTU in 2030, and 14,400–20,500 MTU in 2035.269 China expects to meet this demand using three sources: domestic production, overseas resources, and market purchases. Domestic production will likely account for the smallest share of the increase. More will be supplied from overseas resources tapped as a result of Chinese foreign investment, and the largest share may derive from open-market purchases.270 In the near term, China expects to import increasingly large amounts of uranium from Kazakhstan and Namibia, among other sources where Chinese companies have made investments and secured contracts.

In anticipation of its growing future needs, China has been stockpiling uranium since the 2000s. As of 2015, China’s inventory approached 85,000 MTU of uranium, which is equal to 140 percent of total annual global uranium demand or about ten years’ of then-current Chinese requirements.271 This implied that China was buying about one-quarter of the uranium available on the world market.272 Should, in the coming decades, China expand its nuclear capacity to 150 GWe, China’s requirement might grow to about 25,000 MTU per year (MTU/y) if all of its reactors were fueled with fresh uranium.273 This would be about 40 percent of the world’s current uranium output of about 62,000 MTU/y, according to the World Nuclear Association, an industry organization.

Could world uranium production expand in the 2020s and 2030s to accommodate significantly greater Chinese demand? According OECD and IAEA tracking of the global uranium market, the answer is probably yes. Their unlikely high-growth scenario for nuclear power through 2035, projecting a total world installed capacity of 683 GWe, would require about 105,000 MTU/y—nearly double current production. To meet that level of demand through 2035, they conclude, the world’s current resource base would be “more than adequate.”

Should Chinese nuclear power plant owners continue indefinitely stockpiling uranium to fulfill ten forward years of requirements, they would need to accumulate a running inventory of about 250,000 MTU of uranium to match an installed nuclear generating capacity of 150 GWe. Such an inventory would likely represent somewhat more than three times the annual world uranium production sufficient to meet the fuel requirements for the IAEA’s projected low-growth nuclear power scenario for 2035 (installed capacity of 418 GWe) or perhaps about twice the world annual uranium production needed under the IAEA’s high-growth scenario. That rate of accumulation also implies that China would annually be buying about twice the amount of uranium that it buys now.

Whether the world will produce enough uranium to permit China such an inventory is an open question. From the perspective of Chinese government and industry, the security of China’s future uranium supply will depend on how autonomous China’s leaders believe the country must be. Should China adopt a more relaxed view on international nuclear cooperation, China “will shift from a high inventory strategy to being comfortable with lower inventories.”274 Other experts suggest that China’s current stockpiling might not be strictly intentional but instead the consequence of a post-Fukushima slowdown in China’s reactor construction, and/or a Chinese policy to commoditize its current account surpluses as an alternative to holding U.S. government debt. In any case, if China’s behavior eventually reflects international practice, its uranium stockpiling will decline. Chinese customs data show that the trend line of Chinese uranium imports during the last ten years has been upward and exceeds $2 billion a year, though it may have stabilized as of 2016.275

According to the OECD/IAEA, current global uranium resources would suffice for 160 years if the 2017 worldwide level of uranium demand were to remain indefinitely constant. Beyond this, “exploitation of the entire current conventional resource base”—including speculative reserves—“would increase this to well over 240 years” provided, however, that “significantly increased demand and market prices” would incentivize additional uranium exploration and resource development.276 In general, the uranium industry is confident that the positive historical correlation between expenditure on uranium exploration and production and the size of the conventional uranium resource base will continue to be valid, implying that more and more uranium-laden resources will be identified as investment in uranium production increases. During the last decade, China has become a very major player in the global uranium market. This position will give China market power that it should be able to wield to its advantage to obtain large amounts of uranium under comparatively favorable commercial conditions.

Nuclear Weapons, Nonproliferation, and Nuclear Security

China is a party to the NPT and is recognized by the treaty as one of five states legitimately possessing nuclear weapons, having detonated a nuclear explosive device four years before the NPT’s deadline on January 1, 1968.

China was the last of the NPT nuclear-weapon states to develop a nuclear power infrastructure. In all cases and for many years, central government agencies administered development of both nuclear weapons and nuclear power-related activities, and industrial companies including state-owned enterprises were active in both military and civilian nuclear programs.

Nuclear energy technologies are dual-use technologies: China’s nuclear power program was launched by the central government in part to contribute to the downsizing of China’s military. Today, China’s nuclear R&D institutions, industry firms, academies, and universities train experts who may find employment in either civilian or military nuclear enterprises. As China’s investment in power-projecting technologies expands hand in hand with China’s growing political and economic might, Beijing will want to ensure that China has sufficient nuclear experts to manage and further develop its nuclear weapons assets. As is the case for other nuclear-armed powers, China’s investment in nuclear materials production, processing, and management—and specifically in advanced nuclear fuel cycle systems and reprocessing, uranium enrichment and other technologies for isotope separation—may both indirectly and directly contribute to its nuclear defense.

Like other NPT nuclear-weapon states, China is not obligated under the NPT to apply IAEA safeguards to any of its nuclear materials and activities.277 The NPT does, however, obligate China to not proliferate nuclear weapons to other countries. China, like other NPT parties, must secure its nuclear materials to ensure that they are not lost, stolen, or diverted to non-peaceful uses outside of China.

Separate from its NPT commitments, China has nonproliferation and nuclear security–related obligations following from specific bilateral agreements with numerous countries including Australia, Canada, France, the UK, and the United States. These agreements were negotiated to facilitate nuclear cooperation, including commercial arrangements. Provisions in specific bilateral agreements obligate China to not use nuclear equipment, information, material, or technology provided by a foreign state for any military purpose; to facilitate bilateral verification of that obligation; and not to retransfer export-controlled items to third parties without prior consent. These agreements may include additional national security–related obligations that could have a bearing on China’s nuclear power and nuclear fuel cycle development.278

During an interagency review of the prospective sale of an Areva reprocessing plant to China, the French government considered the potential proliferation risks associated with that transaction. According to participants in those deliberations, it was concluded that Areva should not export a reprocessing plant to China using PUREX technology; that the facility should not be co-located on a military site such as Plant 404 at Jiuquan; and that IAEA safeguards should be applied to the installation.279 The European Commission has undertaken advance preparations to incorporate safeguards measures into the design of a reprocessing plant that Areva would build in China.

While knowledge and experience obtained through the development of reprocessing capabilities may contribute to China’s nuclear defense, U.S. government officials told the author in 2016 that the United States has little concern that reprocessing technology or equipment provided by Areva to China would be misappropriated to produce plutonium for China’s nuclear weapons program if the plant were not subject to IAEA safeguards.280 Consistent with that view, when the United States renewed its bilateral agreement for peaceful nuclear cooperation with China in 2015, it agreed to a new provision that provided China advance programmatic approval to reprocess U.S.-obligated spent fuel in China without IAEA safeguards.

At the same time, U.S. government officials publicly urged China not to reprocess its spent fuel and, according to European counterparts, they also urged France not to proceed with bilaterally negotiated arrangements supporting the transfer of an Areva reprocessing plant to China.281 Some U.S. officials have claimed that Chinese reprocessing of power reactor spent fuel would encourage other states (especially Japan and South Korea) to separate plutonium from their spent power reactor fuel.282

It is not obvious that by reprocessing its power reactor spent fuel, China would precipitate a regional “plutonium competition.” Fuel-cycle policy in Japan and Korea has evolved in a similar fashion as China’s but over a longer trajectory. There is no evidence that China’s nuclear activity has prompted decisionmaking by either Japan or South Korea about the future of their nuclear fuel cycles. Japan has reprocessed power reactor spent fuel since 1977 and a large-scale Areva reprocessing plant has been under construction in Japan since 1989. South Korea in 1997 launched a program to develop pyroprocessing technology to recover and recycle nuclear material from its spent power reactor fuel. From the inception of its nuclear weapons program, China has not relied on nuclear power–related activities to provide nuclear explosive materials for its nuclear defense.

China, in the future, may exceed the record of other advanced nuclear countries and effectively close its industrial nuclear fuel cycle using fast reactors, reprocessing, and nuclear fuel recycling. That might result in a global re-evaluation of nuclear power and an upturn in sensitive R&D and other activities that would raise proliferation concerns, including about the transfers of nuclear wares from states with advanced nuclear fuel cycle technology to states that do not have these capabilities, and about possible hedging behavior of some states. Since 2004, China has been a member of the Nuclear Suppliers Group (NSG), an association of forty-eight countries that regulate the world’s nuclear trade. Specific conditions in the NSG’s guidelines obligate members to restrain the transfer of sensitive nuclear fuel cycle technology.

Should China embark on an industrial-scale nuclear fuel cycle, the logistical challenge of managing large quantities of plutonium would raise nuclear security concerns. These have already factored in China’s decisionmaking. During the 1980s, Chinese nuclear experts assumed that an industrial-scale reprocessing plant would be sited in remote western China, which already hosted sensitive defense nuclear activities. More recently, China’s perspective has changed. In the aftermath of the September 11, 2001, attacks in the United States and amidst rising concern about separatist violence in western China, Beijing is systematically evaluating terrorist threats to transports of nuclear material. Today, in consideration of the logistical and security challenge of transporting large amounts of nuclear fuel to and from coastal nuclear power plant sites to remote inland processing locations, China is considering reprocessing spent nuclear fuel at one of several locations closer to its nuclear power plants.

Compared to other advanced nuclear power programs, little information is publicly available concerning the transport of nuclear materials inside China, making it more difficult for observers to assess the security challenges associated with a substantially larger future nuclear power program and a more complex nuclear fuel cycle. China’s external uranium suppliers say that they have no direct information about where, how, and whether uranium is delivered to designated end-users once China takes custody; not all the uranium China imports is subject to peaceful-use commitments.283 China has numerous regulations in place, and has taken further actions, to secure nuclear materials in its civilian nuclear program.284 The record appears to be consistent with assertions, including during the Nuclear Security Summit process, that Beijing is mitigating nuclear security risks.

The security investment needed for a nuclear power program based on industrial-scale plutonium recycling with fast reactors will be far greater than Beijing’s current requirements for securing low-enriched uranium and unreprocessed spent fuel. Like other NPT nuclear-weapon states that have deployed reprocessing plants and fast reactors, China should be able to provide adequate physical protection and other nuclear security arrangements for a closed nuclear fuel cycle, especially if it is designed to consolidate sensitive nuclear materials and minimize their movements. The more nuclear materials are dispersed across China’s territory—and the more they are exposed to human access during processing and transport—the greater the risk of misappropriation.

Strategic Technology Policy

Modernizers under Deng Xiaoping aimed to catch up with industrialized countries in the field of science and technology, and China for four decades has viewed nuclear energy as a critical field for development. The wealthier China became, the more money Beijing spent. Beginning in the mid-1980s, advanced nuclear power reactors and nuclear fuel processing installations were singled out as targets for strategic government investment.

When Beijing set up a National High Technology R&D Program in 1986 (the so-called 863 Program) to encourage civilian applications of military-directed know-how, it identified nuclear energy as a “key,” or “critical,” technology for China and earmarked development of a fast reactor that became the CEFR. Two decades later, Wen Jiabao’s decision to ramp up nuclear construction coincided with the promulgation of a fifteen-year national Medium- and Long-Term Program for Science and Technology Development that, in effect, repackaged the 863 Program. It included three nuclear “megaprojects” for development of advanced PWRs, HTGRs, and a “large commercial spent fuel reprocessing demonstration project to achieve a closed fuel cycle.”285

In parallel, the government set up a funding program for basic scientific research, the so-called 973 Program, to serve a quarter-million scientists. In 2000, this program began funding ADS research and, in 2007, it provided more R&D funds directed toward partitioning and transmutation of spent fuel materials. The 973 Program has also funded two concepts for a supercritical water-cooled reactor: a mixed-spectrum reactor design involving eight R&D institutes, universities, and industrial firms; and a proposed 1,000-MWe reactor design.286

Specific R&D directives were also drafted in 2005 for a fifteen-year Medium- and Long-Term Plan for Nuclear Power Development. In November 2014, the State Council issued an Energy Development Action Plan for 2014–2020, announcing government funding support for “large PWRs”—including Chinese development of the CAP-1400 PWR based on the AP1000 Westinghouse design under construction in China since 2008—and for development of the Hualong-1 PWR by CNNC and CGN. The plan also included funding for HTGRs and fast reactors. This directive underscored that, during the 2020s, “the PWR will be the leading reactor in China, but not the sole reactor type.”287

From the outset, a leading role in the Chinese government’s support for nuclear technology has fallen to CAS. It functions as an academic institution, think tank, organizer, and funder for nuclear research projects. In 2011, CAS took over ADS research from the 973 Program, including its half-billion-dollar budget to carry out the first phase of a three-phase project aiming to demonstrate partitioning and transmutation by 2032. CAS has also sponsored lead-cooled reactor research and, in 2011, added a long-trajectory program at the Shanghai Institute of Applied Physics to develop a thorium molten salt reactor.

But throwing money at big nuclear science projects is one thing while achieving success is another. The problems encountered by the CEFR suggest that the government’s commitment to fast reactor development wasn’t open-ended or even consistent. The 2016 decision to halt serial deployment of the HTGR at Shidaowan suggests that efforts to commercialize this technology may not have sufficiently considered the economic requirements of power-generating companies foreseen as prime future investors.

In 2015, CAS documented a raft of problems in China’s efforts to close the nuclear fuel cycle, after it was tasked by the government to assess R&D in this area. Despite visionaries’ expectations since the 1980s that a closed fuel cycle would materialize, CAS concluded that China was “twenty five years behind India” on reprocessing development; lacked a “unified leadership” to carry out a demonstration reprocessing plant project; was hindered by uncoordinated and decentralized management of spent fuel inventories; and had failed to develop a cadre of specialists, especially younger experts. What expertise and responsibilities in this field China had were scattered throughout numerous CNNC departments, military organizations, and universities. Compared to the industrial sector, compensation for specialists working in Chinese research organizations was found to be demotivating.288

Four decades after post-Mao modernizers raised the question whether China’s nuclear development should rely on indigenous R&D or foreign cooperation, it would appear the debate has not been fully settled. To be sure, China very successfully assimilated PWR technology transferred from foreign companies. But China’s nuclear power road map now calls on industry and government agencies to innovate and develop deployable advanced technology. Especially because government R&D programs were set up to reduce reliance on foreign technology in support of Chinese import substitution policies, CAS urged the government to reopen this question and “hold a scientific debate at the national level on the extremely costly purchase of reprocessing facilities from foreign firms” to consider “the wisdom of the wholesale introduction of the technology.”289

When China’s 2006–2020 R&D plan was announced, its emphasis on “indigenous innovation” led some experts to conclude that “advocates of a strategic science and technology policy to strengthen indigenous R&D clearly have won out.”290 But as this plan nears its conclusion, questions loom about whether China can command nuclear innovation from the top down and ensure that successful industrial and commercial application will follow. For many years, reaching back to before the Cultural Revolution, China’s industrial development has been inhibited by command economy–style separation of R&D and productive functions that resulted in little innovation.291 On occasion, including in recent years under Xi, the state has admonished R&D organizations, such as CAS, to focus more on getting real-world results from funded research projects. CAS, in return, is not alone in identifying problems in China’s state-directed and highly centralized approach to R&D, “especially in project initiation and design.”292 Particularly if planners call for China’s future nuclear development to increasingly rely on technologies without a proven industrial track record—where project risk will be difficult to assess and may, in some areas, be greater than for what is already deployed—it isn’t clear that increasingly corporatized nuclear firms will simply carry out the will of the Chinese state and the Communist Party, unless they are assured that their costs and risks will be covered by the government. But the realities of China’s so-called new normal, including rising debt and slower growth, suggest that SOEs in coming years might not be able to count upon Beijing to assume the risk that managers will fail.

These questions now beset R&D planners who will be expected to provide guidance when the current fifteen-year technology planning blueprints run their course in 2020. In advance, Xi has ordained that existing R&D programs, specifically 863 and 973, will be superseded by a new streamlined organization to “unify planning and assessment of major projects.” This organization will have five channels, one of which will be responsible for nuclear technology under “national science and technology major projects.”293

Nuclear Safety

Nuclear safety issues were not critical to government and industry decisionmaking for many years during China’s nuclear energy development. China’s first nuclear power plant, Qinshan-1, was built without controversy in the shadow of a debilitating severe accident at the Three Mile Island nuclear power plant in the United States. The Chernobyl accident likewise did not deter China from going forward with the deployment of Soviet-design nuclear power technology.

China’s reaction was very different when three power reactors at Fukushima-Daiichi in Japan melted down in March 2011. Beijing instantly grasped that the implications for China’s nuclear program were significant.

China had taken for granted that Japan would prevent or effectively mitigate a nuclear accident at a Japanese nuclear power plant, and assure that a severe core-damage event with off-site consequences would not happen. The failure of one of the world’s most technologically equipped and experienced nuclear power–generating countries to do that immediately prompted questions by leaders in Beijing whether China, with far less experience than Japan, is vulnerable to a severe accident, including because of governance deficits. The prospect that unknown weaknesses may be lurking in China’s nuclear safety culture was potentially alarming to the political leadership because, only a few years before, it had dramatically accelerated China’s nuclear power development with the aim of eventually installing three or four times the number of nuclear power plants that were operating in Japan at the time of the Fukushima accident.

Within weeks after Fukushima, the State Council ordered safety reviews, suspended new construction, and then lowered the government’s target for nuclear power capacity for 2020 from 70 GWe to 58 GWe, allowing for thirty reactors to be under construction.294 From that point forward, NEA and NDRC could no longer take for granted projections from industry and R&D organizations that China was on track to expand nuclear capacity toward 400–500 GWe by 2050. By 2012, Chinese industry and government officials were willing to openly warn that China’s pre-Fukushima expectations for indefinite forced nuclear power expansion were too risky. In 2012, nuclear safety began to figure in the Chinese government’s programmatic nuclear slogans. “Steady development with safety” became the official watchword for the Chinese population.295 In some cases, nuclear safety checks were prompted by non-nuclear industrial accidents in China that revealed woeful safety culture deficits.296

Until at least 2020, China will not license reactor construction on any of fifteen inland plant sites, a policy issued by the government in direct response to concerns about site suitability raised by nuclear critics after Fukushima. The main concern is that a severe accident at a nuclear power plant would lead to the contamination of rivers and ground water. This is being investigated by NNSA’s technical support organization, but it may be difficult to resolve for lack of benchmarks. Executives at China’s nuclear industry association, which has lobbied the government to approve construction at these sites, acknowledge that some of the proposed inland sites currently lack infrastructure and resources. Some Chinese industry experts say they advocate limiting inland nuclear plant construction to newer-design reactors deemed safer than most of China’s PWRs. During internal discussions with government agencies, proponents of alternatives to PWRs have claimed that their designs are inherently safer than the PWR—assertions that could prove misleading and counterproductive should they be debated by a Chinese public that has little information and knowledge about nuclear matters.

Foreign governments and industry firms questioned during the 2000s whether China’s nuclear regulatory and safety regime would keep abreast of Beijing’s aggressive reactor construction. A 2010 IAEA peer review of China’s nuclear regulatory system urged China to provide NNSA with more money and more personnel, and to ensure that policies and laws “keep pace with China’s nuclear development program.”297 At this time, Western governments believed that NNSA had little bureaucratic weight, and they raised concerns that NNSA could not enforce quality standards for equipment and procedures because it could not compete with SOEs for staff, money, and influence.298 Foreign regulators shared a common understanding that if NNSA were not provided resources matching China’s industrial buildup, the probability of a severe nuclear accident happening at a Chinese nuclear power plant would increase.

Expressed most generally, the biggest nuclear safety challenge on the horizon for a continuously expanding nuclear power program in China is to put in place a robust nuclear safety culture everywhere and at all levels, from drawing boards to reactor operations. That challenge is daunting. Flaws found and reported by NNSA, for example, in design, manufacturing, materials, and oversight during welding examinations in safety-significant (including pressure-boundary) equipment at a number of power reactors in 2015 illuminate the depth and likely extent of safety culture challenges in a nuclear power program that over two decades has added several new reactors per year. NNSA identified and documented causes for these failures: poor supervision, manufacturing defects, insufficient testing of equipment, poor quality assurance, inadequate analysis of inspection results, lack of process control, poor skills in personnel, failure to check installed equipment against design specifications, failure to distribute up-to-date design data to field personnel at the plant site, and lack of experience feedback.299

Since Fukushima, the Chinese government has upgraded NNSA’s status in the bureaucracy and assured greater funding and staffing. IAEA peer reviewers returned to China in 2016 after six years and noted progress. China has adopted safety regulations from foreign countries that have supplied the technology basis for much of its nuclear power industry and, according to IAEA experts, China is meeting IAEA safety fundamentals.300 Notwithstanding evidence of systematic safety culture problems in specific areas illuminated by NNSA at nuclear power plant sites, China has so far never reported a nuclear event rated at level two or above on the IAEA’s nuclear safety scale rated from zero to seven, suggesting that China—unlike many of the world’s nuclear power–generating countries—has never experienced a truly safety-significant nuclear mishap.

In September 2013, the National People’s Congress called for the promulgation of a national nuclear safety law. NNSA favored the measure to establish its legal regulatory authority over China’s civilian nuclear power program.301 In September 2017, the law went into effect.302 Before that, foreign safety experts told the author that they have seen evidence that NNSA has successfully intervened in some cases to prevent licensing and halt actions by nuclear power plant owners on safety grounds. But only with effective legislation in place and enforced can China’s nuclear regulatory regime escape vulnerability to top-down and arbitrary political and bureaucratic interference.

In 2010, IAEA reviewers urged China to pay greater attention to the need to enact policies and better regulate nuclear waste management and the fuel cycle; in 2016, they reiterated that advice. Foreign government sources report that China has made plans to make a significant investment to build up human resources for its future nuclear fuel cycle, including in training, safety, and regulation.

Especially during the first two decades of China’s nuclear development, some foreign experts worried that China’s inexperienced and understaffed regulatory agency would be overtaxed by China’s piecemeal approach to nuclear power development based on “boutique” nuclear power plants relying on different foreign technologies. In part for this reason, China, beginning in the 2000s, aimed to eventually standardize its nuclear program around a single PWR design. It is anticipated that most nuclear plants China will build in the coming years—even decades—will be based on the very few technologies that China is deeply familiar with, including the Hualong-1 PWR model that the government has ordered CNNC and CGN to develop jointly and perhaps larger Chinese versions of the Westinghouse-designed AP1000 PWR. Should China go forward with an industrial-scale closed fuel cycle and fast reactors, NNSA will need expertise to license and regulate these installations and activities. Peer reviewers advised China to build up fuel cycle regulatory know-how hand in hand with its plans to set up future nuclear fuel cycle industry centers.

Significant capacity issues for quality assurance and regulation will also come to the fore, especially if China continues to expand the nuclear program well beyond the level of 100 GWe. Standardization will ease China’s regulatory burden, but the more nuclear plants China builds based on a single design, the more it must defend against common-cause failures in systems and equipment that could lead to costly and safety-significant problems at multiple units. These issues have arisen in France’s nuclear program, which features many power plants with a high level of standardization. Chinese safety experts are currently working on how to screen out common-cause failures and identify design vulnerabilities.303 NNSA reports from 2016 suggest that Chinese experts are focusing more on this issue because China’s nuclear power program has begun to encounter common-cause problems.304

Another equipment problem that may be more difficult to address is counterfeit or substandard components. This issue was first raised with NNSA in the 2000s by foreign governments whose industries are partnering with Chinese nuclear firms and were concerned about corruption and lack of quality assurance. An average nuclear power plant contains about 3,000 nuclear-grade valves, 250 pumps, 44 miles of piping, 300 miles of electrical wiring, and 90,000 electrical components.305 Considering China’s possibly weak quality assurance for many of these off-the-shelf and common industrial items, companies and regulators must root out the threat that substandard, improper, or even fraudulent equipment could cause or contribute to a safety-significant accident. In recent years, NNSA has detected counterfeit components that had been installed in nuclear power stations.306 There is a real possibility that this issue may lead to an accident if not rigorously pursued, as a modern Chinese nuclear power plant contains equipment from about 5,000 different suppliers. In a country with a relatively weak track record of industrial safety, where there is official pressure to favor indigenous technology and inputs, and where the manufacturing industry relies on competitive advantage from low costs, assuring the safety of an expanding nuclear power program may be considerably more difficult than elsewhere.

Continued expansion of China’s nuclear power program will challenge decisionmakers to establish metrics for nuclear safety capacity and effectiveness. If China builds several hundred nuclear reactors toward 2050 and beyond, regulators and political leaders may have to decide at what point the risk posed by a projected nth nuclear power plant would be too great to accept based on their assessment of the country’s nuclear safety capacity.

Exports and International Trade

Beginning in the mid-1950s, the United States launched a long-term program called Atoms for Peace, which included bilateral peaceful nuclear cooperation with dozens of countries and encouraged U.S. industry firms to sell nuclear goods to Washington’s foreign partners. Atoms for Peace was part of a strategic U.S. government effort to contain communism and combat Soviet influence. More generally, it was intended to enlarge America’s sphere of influence, extend U.S. power globally, and, according to one National Security Council memorandum, “strengthen American world leadership” by diplomatic and commercial means through the dissemination of nuclear technology.307

The benefits of this program for the United States were considerable. Atoms for Peace made good on its promise “to make potential recipients interested in U.S. technology.”308 U.S. nuclear industry vendors exported reactors to over fifty countries and sold enough wares abroad during three decades that, today, about three-quarters of the world’s 450 nuclear power reactors are based on technology that was originally invented and patented by U.S. companies and their partners. The collaborative and commercial ties that were formed between U.S. entities and foreign companies afforded the U.S. government a window into strategic decisions by allies and other governments benefiting from U.S. know-how, equipment, and nuclear material. Through these relationships, the United States led the world during the entire second half of the twentieth century in the establishment of multilateral arrangements for nonproliferation, nuclear trade, nuclear safety, and nuclear security. The United States profoundly influenced the formation of global norms in all these areas.

In coming decades, China may assume the mantle of global nuclear leadership in critical areas, including international nuclear trade. As China’s nuclear development has quickened, Beijing has aggressively forced foreign companies and governments to transfer their intellectual property for nuclear reactors, fuel production, and engineering services to China, in line with a rigorous national economic development policy based on import substitution and zero-sum replacement of foreign technology by Chinese know-how. During the 1990s and 2000s, U.S. and French officials and entities appeared to challenge claims that China owned intellectual property for nuclear reactors that CNNC exported to Pakistan, then China’s sole foreign nuclear reactor client.309 Today, however, China, like France and Japan in the last century, has largely succeeded in wresting free of foreign claims limiting its freedom to export nuclear power reactors and Beijing is now offering Chinese-branded nuclear equipment, including turnkey nuclear power plants, to foreign clients. China’s struggle to obtain foreign intellectual property has resulted in U.S. espionage charges against Chinese military and company personnel.310

At the end of the 2010s, and perhaps for years to come, the key to China’s emancipation is likely to be Hualong-1 (also known as HPR-1000), the PWR design that Beijing ordered CGN and CNNC to collaborate on and market abroad. The design is based on two Chinese PWR models that incorporated older foreign technology and newer Chinese engineering permutations. China now claims it owns “complete independent” intellectual property for this reactor.311 As part of a comprehensive bilateral agreement, China aims to build Hualong-1 in the UK during the 2020s. In the meantime, China could export the reactor elsewhere.312

Aside from the highly visible UK nuclear power plant sale, China has also forged nuclear cooperation arrangements with Algeria, Argentina, Iran, Jordan, Kenya, Romania, Saudi Arabia, South Africa, and Turkey. The need to meet technical licensing requirements may hold back export of Chinese wares to countries with advanced nuclear programs. But Chinese vendors will have the advantage of access to cheap credit. Above all, China’s ongoing nuclear buildup has allowed Chinese vendors to set up a solid supply chain and develop expertise that can be quickly mobilized for new projects. By contrast, U.S. and European firms during the last two decades have lost expertise; their projects to build nuclear power plants outside of China have been set back by massive delays and cost overruns. China is building nuclear power plants at an overnight cost of about $3,500 per installed KWe, compared to about $5,500 for Europe. Analysts anticipate that Chinese industry will preserve its competitive advantage over Western competitors for decades to come.313 In the meantime, the leading two nuclear industry companies in the West—Westinghouse and Areva—are mired in crisis-level financial difficulties due to lack of business outside China, loss of capacity, and mounting nuclear project risk following from deregulation of financial and electricity sectors.

In the coming years, Chinese firms that have invested billions of dollars in nuclear power plant manufacturing capacity will be tested by the “new normal” conditions. If the rate of new nuclear construction in China during the 2020s and 2030s is less than anticipated a decade ago, China’s nuclear export drive will be counted on to contribute to Xi’s plan for Chinese industry to sell more high-value capital goods. This includes participation in the Belt and Road Initiative to spread China’s political influence on the back of strategic exports—power systems, transportation lines, and port infrastructure—to destinations in southeast Europe, Southeast and Central Asia, and the broader Middle East.314

Exporting PWRs would also provide relief to Chinese companies should they eventually invest in more expensive domestic infrastructure for advanced reactors and a closed fuel cycle. China might then also try to establish itself as the fulcrum of a regional nuclear fuel cycle scheme, in which China would build PWRs abroad, lease uranium fuel for those reactors, take back the spent fuel, and reprocess it to obtain fuel for domestic reactors. If such a system were able to function without serious legal and logistical bottlenecks, technical difficulties, or political impediments, it would increase China’s influence among participating countries as the guarantor and custodian of nuclear fuel supply—especially if China agrees to retain nuclear waste from reprocessed spent fuel. As early as 2006, Chinese officials had considered the possibility of such an arrangement for neighboring states that were preparing to introduce nuclear power in the future. In the absence, so far, of firm plans by any more states on China’s periphery to build nuclear power plants—as well as rising concern by China’s neighbors about their freedom of action vis-à-vis Beijing—prospects for any such scheme during the 2010s have receded. Should a rationale emerge in coming years, the way forward will be difficult: discussions involving China and Taiwan and between China and German industry during the 1980s and 1990s, concerning the possible storage or disposal of foreign nuclear waste or spent fuel on Chinese territory, proved intractable partly because China concluded that it had greater leverage.315

Historically, very few countries that have deployed nuclear power technology have become successful nuclear power plant exporters. The challenges China must overcome are considerable, including oversight, quality control, correction of mistakes, safety culture leadership, uniformity with international standards, and counterfeit equipment. If the schedule for a foreign nuclear project proves untenable, the pressure on Chinese contractors to cut corners may be great.

Public Acceptance and Political Risk

China’s nuclear energy program is firmly under the control of the central government and the ruling Communist Party. They command its funding, organization, oversight, management, senior personnel appointments, technology development and selection, investment, and all interactions with the outside world. To a greater degree than in other advanced nuclear power programs, China’s rulers have very powerful levers to make and implement policy. Nuclear decisionmaking follows from a complex process of interactions, formal and informal, involving officially acknowledged stakeholders in the executive government, China’s administration and planning bureaucracy, SOEs, Communist Party organizations and leaders, official academic and science organizations, and the military. For nearly all of China’s nuclear history, the people, writ large, have neither had much to say nor have they been asked.

When China launched nuclear power construction in the 1980s and 1990s, Beijing brushed off objections raised in signature petitions and arrested protestors.316 Since then, China has not disclosed any safety-significant nuclear events or accidents and, for many years throughout its nuclear power buildup, China witnessed no public nuclear turmoil. As China’s air quality deteriorated, the government has argued that expanding nuclear power production will reduce pollution. Especially in wealthy and information-dense east coast urban areas, where nearby nuclear power plants are substituting for base load coal-fired units, it would appear that China’s urban population generally shares that view but also favors limiting the expansion of local nuclear capacity.317

The accident at Fukushima and continued effects of globalization in China are changing this relatively static picture. In the wake of the accident, the Chinese population appears to be developing a more differentiated perspective about nuclear power and is more willing to intervene in the siting of nuclear installations. Immediately after Fukushima, Chinese authorities had to dispel radiation fears that led to a panicked rush to buy iodized salt in Chinese cities.318 In 2013, protests erupted in the southeastern city of Jiangmen following the city government’s announcement that a nuclear fuel processing complex would be built there. The installation would have been completed by 2020 and large enough to provide half the enriched uranium fuel required by China’s nuclear power plants. China’s nuclear SOEs will likely build the plant elsewhere. In August 2016, demonstrators objected, in what Chinese media described as violent clashes between protesters and police, to an announcement by the city of Lianyungang, in Jiangsu Province, that it had been selected as the site of the projected Areva reprocessing plant.319

In both these cases, protests followed closed-door negotiations held by provincial and local city rulers with the central government and industry over terms for project approval, according to Chinese and Western government officials. Protesters objected that authorities had not given the public advance notice of these projects and little or no opportunity to comment or contribute to decisionmaking. Some protesters, in both cases, referenced the need for information and concern about radiation and environmental dangers in the aftermath of Fukushima.

While Chinese public opinion about the risks of nuclear power may, on balance, remain stable, public acceptance will be critical to the future of China’s nuclear program in at least two areas. First, continued expansion of nuclear power in China directly depends on building plants at a number of proposed inland locations. Construction on any of these sites, which was called for in the government’s plans for accelerating nuclear development beginning in 2006, has been delayed until at least 2020 due to objections raised on safety and environmental grounds. In the meantime, China is permitting some “pre-authorization” work to take place at designated inland locations, apparently counting on the benefits from employment and investment to sway local communities to favor yet-outstanding political approvals that will be sought under the Fourteenth Five-Year Plan. Second, if China’s population differentiates between nuclear power plant investments that bring valuable electricity and welfare to local communities as distinct from nuclear material processing plants that are concerned with radioactive waste and perceived to be risky, that could threaten Chinese ambitions for a closed nuclear fuel cycle. China’s rulers are generally aware of this potential challenge: one year after the accident in Japan, NDRC introduced a mechanism for assessing the social and political risk associated with future large infrastructure projects into its planning process.320

Unlike in Western countries, opposition to nuclear power in China may be concentrated in rural areas rather than relatively wealthy cities dense with information and infrastructure. Fear of radiation may be widespread in rural China, and local communities are suspicious that the state will invoke rights of eminent domain to their disadvantage. Urban Chinese, by contrast, are counting on nuclear power to clean their air. Should China’s power grid be outfitted with ultra-high-voltage lines permitting nuclear power to be generated in remote places and transmitted to megacities, local populations may object that they are assuming all of the risk for nuclear installations that benefit wealthy city dwellers. This factors into opposition to nuclear power plants in Japan.321 In the debate over whether China should build nuclear power reactors at inland sites, coastal residents have complained that adding reactors at existing sites is no alternative “because we already have too much nuclear power.”322

According to a government survey reported on by the Chinese Academy of Engineering in August 2017, “only 40% of the public supports the development of nuclear power in China.”323 If true, China’s success in overcoming public suspicion or opposition to nuclear power development will require the central government to be politically sensitive and proactive. In discussions about public acceptance in China, which the author participated in during 2014 and 2015, some Chinese experts dismissed nuanced concern raised by foreign industry executives and regulators that inland sites present a different risk profile than coastal sites. They also blamed anti-China politics in Hong Kong for opposition in southeastern China to nuclear construction in 2013.324 During the 2015 Carnegie workshop, Chinese experts explained that Chinese authorities were aware of technical challenges in demonstrating the safety of semi-arid inland sites with weak infrastructure for PWRs, and they added that Chinese industry and regulators would more generally be challenged to explain the concept of residual risk to a public that has very little knowledge about nuclear issues and that “expects a yes or no answer.”325

Strategic Takeaways

Moving ahead with its nuclear program, China will have to consider a number of challenges apart from questions of technology choice and economics.

Energy Security: Driven by the expectation that it would generate nuclear electricity for hundreds of years, China has long assumed that it must close its nuclear fuel cycle to ensure that it does not run out of fuel. Because the timelines for uranium depletion have receded, China must assess the extent to which and for how long it will trust global market forces to provide uranium.

Nuclear Weapons, Nonproliferation and Nuclear Security: Over the last twenty years, China has joined the world’s nonproliferation and nuclear security regimes. Deploying more advanced technologies will increase China’s responsibilities and raise its profile in this area. For Beijing to take on a global leadership role, it must go further than its current commitments, which are perceived outside China as minimalist and transactional. As a nuclear weapons state, future investment in technologies related to a closed fuel cycle may be assumed to also benefit China’s nuclear defense.

Science and Technology Policy: Especially given trends in China that favor industry protectionism, corporatization, and risk minimization, it remains to be seen whether or not Beijing will become a world leader in the transition to advanced nuclear technologies.

Nuclear Safety: China faces numerous challenges from its historically weak industrial safety culture and the strain on regulatory capacity that has been exacerbated by nuclear growth. Barring measures to effectively generalize safety culture, more nuclear power reactors in China means greater risk.

Nuclear Exports: After decades of aggressive intellectual property and import-substitution policies, China is poised to become a significant supplier of nuclear equipment and services worldwide. Success is not assured, but it would facilitate China assuming a leading role in global nuclear rulemaking.

Public Acceptance and Political Risk: The Fukushima accident may have profound long-term impacts including: empowering regulators; encouraging aversion to risk; and creating political tensions between China’s leadership and public over information transparency, equity, and center-periphery decision making authority.

268 NEA and IAEA, Uranium 2016: Resources, Production, and Demand (Paris: OECD and IAEA, 2017) 207 https://www.oecd-nea.org/ndd/pubs/2016/7301-uranium-2016.pdf, 207. OECD and the IAEA, in 2016–2017, called these estimates “preliminary calculations.” Industry analysts told the author in February, 2018, that China’s demand in 2000 may be lower than 10,100 MTU, and that the low OECD/IAEA estimate for 2035 would correspond to an installed nuclear generating capacity in China of about 80 GWe, a level that would represent a significant reduction in the rate of China’s nuclear power capacity expansion between now and 2035. Elsewhere, OECD/IAEA estimates China’s uranium demand for 2020 to be between 6,400-9,680 MTU (ibid., 99).

274 Ibid. These analysts forecast that China will likely continue to aggressively build inventory levels through the mid-2000s and then begin reducing them. By the 2030s, China would hold perhaps three-years of requirements, reflecting current levels in the United States, Europe, and the rest of the Asia-Pacific.

279 Author communications with European Union and French officials, 2010. These sources gave national security reasons for a policy adopted by France and Areva not to provide a PUREX plant to China that would be erected at a military site. Bunn, Zhang, and Kang, “The Cost of Reprocessing in China,” cites Chinese sources as asserting instead that China would not permit a foreign reprocessing plant to operate on a military site lest foreign parties obtain classified information on the site concerning China’s nuclear weapons program. A Chinese expert told the author in 2016 the 200 MTHM/y plant was not sited at Jiuquan because it was considered a seismic risk; Western government officials in 2016 dismissed this claim; they also said that Belgium, like France in the case of the Areva reprocessing plant, had opposed China’s intent to site plutonium fuels processing equipment provided by Belgian industry at the military Jiuquan site.

315 China approached Taiwan during the 1990s with an informal offer to remove Taiwan’s nuclear waste to mainland China, and thereby defuse a political crisis on Taiwan prompted by local opposition to waste disposal on Taiwan. Taiwan rejected the Chinese offer after Chinese counterparts indicated that the price that Taiwan must pay would include acknowledgement of limitations on Taiwan’s sovereignty (author communications with Taiwanese nuclear executives and government officials, Taipei, 2001).

317 Statements from policy research staff, State Council of Ministers, and China National People’s Congress at the first Carnegie workshop, Beijing, 2014; see also Lingyi Zhou and Yixin Dai, “How Smog Awareness Influences Public Acceptance of Congestion Charge Policies,” Sustainability 9, no. 9 (September 2017).